PUC worried about reliability if FirstEnergy plants close

The Pennsylvania Public Utility Commission is concerned about what the closure of two coal-fired power plants in Southwestern Pennsylvania will mean for the power reliability for the broader regional grid and also for prices for local electricity consumers, according to written testimony given Friday by PUC Chairman Robert Powelson.

The PUC along with PJM Interconnection, the region’s grid operator, are concerned taking the 2,000 megawatts of base load created by these plants will hurt reliability, Powelson said, and it has been suggested the company keep at least a portion of units running.

James Lash, president of FirstEnergy (NYSE: FE) Generation told senators in written testimony that the company is confident that taking these plants, which constitute 10 percent of the company’s generating capacity, will not affect grid reliability.

The decision to close the plants was made after considering the future environmental rules that are needed in the near term plus uncertainty over rules in the longer term plus the fact that both plants are losing money.

Lash noted these plants were not cleared in PJM’s base residual capacity auction and noted FirstEnergy would like to see changes in PJM’s energy markets to ensure that existing generation is retained and new generation projects are encouraged.

Powelson questioned the company’s decision to close the plants instead of converting them to natural gas, which the company had publicly said it was considering.

“Given that these power plants are located in southwestern Pennsylvania and are sitting on top of one of the largest shale deposits in the world it makes sense that FirstEnergy would want to take advantage of this low-cost resource and convert to natural gas co-firing units,” he said.

Powelson also questioned why the company wasn’t taking advantage of options it had to comply with new environmental standards or why the company wouldn’t opt to sell the facilities instead of close them. He noted the company is looking for permission to sell some hydroelectric units.

“The future of the Hatfield’s Ferry and Mitchell power plants is vitally important to the PUC,” he said. “As the chairman of an agency that is charged with protecting the public interest, my goal is to ensure that the final outcome of this matter does not hurt consumers or decrease the reliability of our electric grid.”